Would you buy a OneLakhCar? (Part-1)

TATAs are not blusterers and they have delivered in the past. Making it the 3rd largest player, TATA Motors has 17% marketshare in passenger car segment. Tata Motors has never had it this good in the last few years despite general declining sales in auto industry, commercial included. TATA Ace has bridged the gap of the 'perfect vehicle' for last-mile logistics, with its 1-tonner 'tempo' which is selling like hot cakes. Ace's commercial passenger cousin 'Magic' is similarly expected to set tracks on fire . One last tidbit: in commercial segment, TATAs have a whopping 65% share. Having put them in this perspective, it would be goosey to say TATAs have not read the market.

But in an upwardly mobile middle class, would a 1 Lakh Car be popular?

There are many dimensions one must consider before answering the question. Living in a city and seeing more and more newly-introduced models from Hyundai, Honda, Corolla, GM, Ford and MUL swoosh by on urban roads (I believe there is deep but random penetration in villages too), I have my reservations about this car. Rural market might be the target, but if the OneLakhCar is competing with Maruti800, one must take into consideration that the latter has seen steady decline in sales even in rural markets in the last two years.

When MUL came out with the original Maruti-Suzuki in the 80s, indeed, the objective was to bring home an affordable car for the common man and a 1 Lakh (or so) tag was acceptable at the time. And what a car it was with original Japanese engine and know-how! The bean car brought in a technological leap in auto industry. None of the indigenously built cars could match up to what Maruti-Suzuki offered. Be it size-wise performance, maintenance or economy of ownership. There is little that needs to be said about MUL's success. So, the idea behind Maruti was a noble one, if you know what I mean.

In principle, the intent behind the OneLakhCar seems to be less nobler (for lack of another term). Affordability seems to be the only criterion for this car. Of course, the TATA quality and brand will assure that the car is not made with cheap parts (brand equity based assumption), but price seems to be the only basis for differentiation, something that will not incite enthusiasm in every buyer.

To push down costs, there are bound to be compromises (within the realm of TATAs brand equity). Component manufacturers have invested capital hedging on the success of the car. Metal costs only rising, the body of the car is said to be of composite material rather than steel or aluminium. (This has been done before- the most elegant example being the sexy Corvette. But hey, they may not use the same stuff here!)Unofficial estimates put the margin-to-manufacturer at Rs.5000 per car. Further, based on work done by analysts, having invested Rs.6000 Crores, TATAs have to sell 1 million cars every year (and they plan to) for four years to break even. Is this possible?

Recent announcement that by year 2009, air-bags in new passenger cars will be no more optional but factory-fitted-mandatory, it is worth asking if the OneLakhCar has this cost built in. Or will it only be 1 Lakh ex factory? Costs toward Bharat IV and EURO III norms would no doubt have been built in.

What about the design? Speculation is rife on whether the car will be a Reva look-alike, Mini-Indica(!) or the Lankan MiniCar (a rounded Reva, I found out after some Googling). Whatever it is, on a 600cc engine, one cannot expect a huge frame. Then how will it be a four or five seater? I secede, I am not design-savvy.

There is a growing need for mobility given the changing lifestyles and lame public transport. The culture of using public transportation is slumping for several reasons, affordability not being the least of them. Mobikes and scooties if not cars fill parking lots of colleges and sometimes schools. The average price of mobikes has crossed Rs.50K, and that of high end indigenous bikes is closing in to Rs. 1 Lakh. Relative safety considerations and the aspirational value of a car would thereby sway a first time buyer or a two-wheeler owner toward the OneLakhCar.

So, there is a reasonable chance that the car will be popular since there is a huge market out there. And there is no offering in this segment right now.

(Coming up...what will happen if the OneLakhCar does its magic.)